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to transfer funds as a result of its guarantees. In that unlikely event, the resources of the Exchange Stabilization Fund (ESF) would be used to fulfill the requirements of immediate payment on the guarantees. Should it appear desirable, in light of economic and other conditions, for the United States to make direct loans to the Support Fund, these could also be provided from the ESF in accordance with existing statutory authority. This new legislation provides for appropriations to be used to replenish ESF resources to the extent the Stabilization Fund is used for these purposes. In no event will U.S. financial obligations to the Support Fund exceed the dollar value of its quota.
The draft legislation as submitted by President Ford follows:
A BILL To provide for the participation of the United States in the Financial Support Fund
Be it enacted by the Senate and the House of Representatives of the United States of America in Congress assembled,
ACCEPTANCE OF MEMBERSHIP
SEC. 2. The President is hereby authorized to accept membership for the United States in the new international financial organization (hereinafter referred to as the “Support Fund”) provided for by the Agreement Establishing a Financial Support Fund of the Organization for Economic Cooperation and Development (hereinafter referred to as the “Agreement”).
ISSUANCE OF GUARANTEES
SEC. 3. (a) The Secretary of the Treasury (hereinafter referred to as “the Secretary') is authorized to issue guarantees, backed by the full faith and credit of the United States, for the purpose of carrying out the financial obligations of the United States under the terms of the Agreement.
(b) There are hereby authorized to be appropriated to the Secretary, without fiscal year limitation, such sums as are necessary to meet obligations on guarantees issued under subsection (a) of this Section, but not to exceed an amount of dollars equivalent to 5,560 million Special Drawing Rights.
LIMITATION ON UNITED STATES OBLIGATIONS TO THE SUPPORT FUND
SEC. 4. The combined total of all obligations of the United States to provide financing to the Support Fund, and payments made under such obligations, shall not exceed an amount, outstanding at any time, of the dollar equivalent of 5,560 million Special Drawing Rights.
AMENDMENTS TO THE AGREEMENT
SEC. 5. Unless Congress by law authorizes such action, neither the President nor any person or agency shall, on behalf of the United States, agree to any amendment of the Agreement which increases the quota of the United States or which otherwise increases the obligations of the United States, or would change the purpose or functions of the Support Fund.
JURISDICTION AND VENUE OF ACTIONS
SEC. 6. For the purpose of any civil action which may be brought within the United States, its Territories or possessions, or the Commonwealth of Puerto Rico, by or against the Support Fund in accordance with the Agreement, the Support Fund shall be deemed to be an inhabitant of the Federal judicial district where it has appointed an agent for service of process, and any such action to which the Support Fund shall be a party shall be deemed to arise under the laws of the United States, and the district courts of the United States, including the courts enumerated in Title 28, section 460, United States Code, shall have original jurisdiction of any such action. When the Support Fund is defendant in any action in a State court, it may, at any time before the trial thereof, remove such action into the district court of the United States for the proper district by following the procedure for removal of causes otherwise provided by law.
UNITED STATES REPRESENTATION TO THE SUPPORT FUND
SEC. 7. The Secretary shall represent the United States on the Governing Committee of the Support Fund. The Secretary may delegate this function pursuant to Reorganization Plan No. 26 of 1950 (5 U.S.C. App. 544), and may select an alternate.
STATUS, IMMUNITIES, AND PRIVILEGES SEC. 8. The Agreement, and particularly Article XVII, shall have full force and effect in the United States, its Territories and possessions, and the Commonwealth of Puerto Rico, upon acceptance of membership by the United States in, and the establishment of, the Support Fund.
SECURITIES ISSUED BY THE SUPPORT FUND AS INVESTMENT SECURITIES
SEC. 9. (a) The last sentence of paragraph 7 of section 5136 of the Revised Statutes, as amended (12 U.S.C. 24), is amended by striking the word "or" after the words “the Inter-American Development Bank" and inserting a comma in lieu thereof and by inserting after the words “the Asian Development Bank” the words "or the Financial Support Fund."
(b) In order to implement Article VII, Section 6(c) of the Agreement, any obligations or securities issued by the Support Fund are deemed to be lawful investments of any person, partnership, association, fund, institution or corporation, to the same extent as obligations of the International Bank for Reconstruction and Development are lawful investments, any other law notwithstanding.
SECURITIES ISSUED BY THE SUPPORT FUND AS EXEMPT SECURITIES; REPORT
FILED WITH SECURITIES AND EXCHANGE COMMISSION
SEC. 10. (a) Any securities issued by the Support Fund shall be deemed to be exempted securities within the meaning of paragraph (aX2) of section 3 of the Act of May 27, 1933, as amended (15 U.S.C. 77c), and paragraph (aX12) of section 3 of the Act of June 6, 1934, as amended (15 U.S.C. 78c). The Support Fund shall file with the Securities and Exchange Commission such annual and other reports with regard to such securities as the Commission shall deter. mine to be appropriate in view of the special character of the Support Fund and its operations and necessary in the public interest or for the protection of investors.
(b) The Securities and Exchange Commission, acting in consultation with such agency or officer as the President shall designate, is authorized to suspend the provisions of subsection (a) at any time as to any or all securities issued by the Support Fund during the period of such suspension. The Commission shall include in its annual reports to Congress such information as it shall deem advisable with regard to the operations and effect of this section and in connection therewith shall include any views submitted for such purpose by any association of dealers registered with the Commission.
For President Ford's transmittal letter and the Special Report of the National Advisory Council on International Monetary and Financial Policies, see H. Doc. No. 94–178, 94th Cong., 1st Sess., United States Participation in the Financial Support Fund. The President's transmittal letter may also be found at Cong. Rec., Vol. 121, No. 90, June 10, 1975, pp. S10164-10165 (daily ed.).
On July 30, 1975, Charles W. Robinson, Under Secretary of State for Economic Affairs, testified before the Senate Foreign Relations Committee in support of the President's request for authorizing legislation. He stated, in part:
we see an urgent requirement for the Financial Support Fund to achieve the following fundamental objectives:
1. To assure that countries will not be driven to unilateral restrictive measures that would be destructive of the international economic system and habits of cooperation that have been so painstakingly built up over the past 30 years.
2. To promote appropriate domestic and international economic policies fundamental to economic prosperity and thus to political stability and good relations.
3. To encourage full international cooperation in energy policies to reduce our vulnerability to foreign supply interruptions, to conserve energy, and to develop alternative energy sources. Such policies are essential to reduce our future vulnerability and preserve maximum independence for foreign policy decisions. They offer the best hope for obtaining reasonable oil prices. They are also essential to serve as a basis for proceeding to a productive dialogue with the oil-exporting countries.
4. To instill the confidence that will promote a smoothly working international financial system free from fears of financial collapse or artificial payments restrictions,
5. Finally, to reinforce the structure of economic and political cooperation, which is both an objective in itself and an essential precondition to an effective foreign policy.
We believe that the basic features of the Financial Support Fund are the right ones for these objectives in the present situation:
-It is a temporary facility designed to meet a temporary need. Its lending authority will lapse two years after it comes into existence although it could of course be extended by mutual agreement if deemed necessary. The need is temporary because the large balance-of-payments surpluses of the oil exporters, which are the source of the problem, are temporary-although we cannot be sure how long they will exist. High energy prices and government policies will encourage conservation and increased energy production elsewhere, which will cut into oilexporting revenues. Simultaneously, the oil-exporting countries will be rapidly expanding their demands for foreign goods and technology, increasing their payments abroad. We expect the cumulative OPEC surplus to grow more slowly and perhaps level off by the early 1980's at $200-$250 billion in 1974 dollars.
- The Financial Support Fund does not attempt to replace the private market or other existing official mechanisms. Rather, it provides a valuable supplement to them. In fact, we expect that the existence of the Fund will help to bolster the confidence of private markets and thereby could conceivably make recourse to the Fund unnecessary. The IMF (International Monetary Fund) will continue to play an important role in balance-of-payments finance in the present situation and, as the principal permanent institution for international financial cooperation, long after the end of the current exceptional need. The central bank swap network will continue to provide short term support for exchange operations. Regional facilities such as the EC (European Community) medium-term borrowing facility can make a useful contribution. Before the Financial Support Fund would be drawn upon, other appropriate sources would be tapped to the maximum reasonable extent.
-The Financial Support Fund does not rely on the good will or cooperation of outside countries such as the oil-exporting cartel. Since these countries must in any case place their excess revenues in Western capital markets, these can be tapped at the option of the participating countries.
-The Fund requires countries to avoid restrictive trade and payments measures, and a country facing foreign exchange pressures must take appropriate domestic measures to correct its financial problems. Thus it cannot and will not be used to finance countries following imprudent or wasteful policies. I can assure you that we intend to make this provision of the agreement effective.
-The Financial Support Fund specifically sets forth among its purposes the promotion of policies to promote increased production and conservation of energy and requires that any member receiving assistance through the Fund be following policies consistent with these purposes. Therefore it offers positive incentive to participation in international cooperative energy efforts.
-It is not a concessional or aid-type program. It is a mutual support facility, with every member having the possibility of receiving support. Loans will be provided only on terms which reflect borrowing costs in the market. There is no subsidy involved aside from the assumption of risk.
-Finally, the Financial Support Fund provides an equitable means of sharing financing burdens and risks among the participating countries, all of whom have a large stake in the achievement of the objectives of the Fund.
Dept. of State Bulletin, Vol. LXXIII, No. 1887, Aug. 25, 1975, pp. 265–268.
On October 20, 1975, the United States and the Soviet Union signed a letter of intent to conclude an agreement on sales of Soviet crude oil and petroleum products to the United States. The letter of intent was signed concurrently with signature of the fiveyear agreement for sale of U.S. grain to the Soviet Union (see ante, Ch. 10, $ 2, pp. 539–545), and it called for negotiations on an oil agreement to begin promptly.
The letter of intent on crude oil and refined products contemplated annual sales by the Soviet Union over a five-year period of up to ten million metric tons (equivalent to about 200,000 barrels a day). The crude oil and petroleum products could be purchased by the U.S. Government for its own use or, by the agreement of the two governments, the purchases could be by U.S. firms. A portion of the oil or petroleum products would be shipped to the United States, partly in tankers used to transport grain from the United States to the Soviet Union, and a portion might be delivered to Europe or other agreed marketing areas. Additionally both governments would work for the extension and expansion of cooperative efforts in the energy field, particularly directed toward fuller application of the technical capability of both countries in increasing energy output from existing sources and in developing new sources of energy. Prices for crude oil and petroleum products were to be mutually agreed at a level to satisfy the interests of both countries.
For the text of the letter of intent, see Weekly Compilation of Presidential Documents, Vol. 11, No. 43, Oct. 27, 1975, p. 1188; Dept. of State Bulletin, Vol. LXXIII, No. 1898, Nov. 10, 1975, p. 664.
On May 6, 1975, the Department of State issued a statement protesting a decision announced the previous day by the Canadian Government to increase the export price of natural gas to U.S. consumers. The Department emphasized that it considered the increase discriminatory and a breach of long term contracts on exports. The announced increase was from $1.00 to $1.40 per thousand cubic feet on August 1, 1975, and to $1.60 on November 1, 1975. The Department estimated it would cost U.S. consumers of Canadian natural gas an additional $583 million a year. The following is an excerpt from the Department's announcement: